Choosing a life insurance policy comes down to a few decisions: how much coverage you need, how long you need it, what type of policy fits, which company to trust, and which extras are worth paying for. Get those right, and the policy will do its job when your family needs it.
Quick answer: To choose a life insurance policy, decide what the coverage is for, calculate how much you need (the DIME method is a simple starting point), choose term for temporary needs or permanent coverage for lifelong ones, pick an insurer rated A or better by AM Best with a low complaint record, and compare quotes for the same coverage amount, term, and rate class from more than one insurer.
How to Choose a Life Insurance Policy: The 5-Step Process
The best life insurance policy for your needs is the one that pays enough, for long enough, from a company that will be around to pay it, at a price you can keep up. These five steps get you there.
Step 1: Define the purpose and how long you need coverage
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Step 2: Calculate the coverage amount (DIME method)
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Step 3: Choose the policy type (term, whole, universal, final expense)
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Step 4: Check the insurer’s strength and the riders you need
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Step 5: Understand underwriting, exclusions, and beneficiaries, then compare quotes
Why choosing carefully matters
The two most common and expensive mistakes go in opposite directions. Some people buy too little coverage, often relying only on a policy through work, and leave their family short. Others buy permanent coverage they don’t need and can’t comfortably afford, then let it lapse. Taking a structured approach helps you avoid both.
How do I choose the right life insurance policy for my needs?
Start with the job you need the policy to do. If it’s protecting your family while you’re working and paying off a mortgage, term life sized to your full need is usually the right fit. If you need coverage that never expires, such as for final expenses or a lifelong dependent, a permanent policy makes more sense. Then size the policy, choose a financially strong insurer, add only the riders you need, and compare quotes for the same coverage from several insurers.
Steps 1 and 2: Decide What You Need and How Much
First decide what the policy is for and how long the need will last; then add up the numbers. The DIME method (debt, income, mortgage, education) is a simple way to estimate a coverage amount, as long as you also subtract what you already have and include the value of a stay-at-home parent.
Step 1: Define the purpose and duration
Most life insurance needs fall into two groups:
- Temporary needs: replacing income until retirement, paying off a mortgage, covering children until they’re independent, or repaying a business loan. These usually suit term life.
- Permanent needs: final expenses, an inheritance, estate taxes for larger estates, or supporting a dependent with lifelong needs. These usually suit permanent coverage.
Many households have both, which is why some people combine a large term policy with a smaller permanent one.
Step 2: Calculate your coverage with the DIME method
DIME adds up four categories:
- D, debt: non-mortgage debts such as car loans, credit cards, and private student loans, plus final expenses like a funeral.
- I, income: your annual income multiplied by the number of years your family would need it.
- M, mortgage: the remaining balance on your home loan.
- E, education: the amount you’d want to set aside for your children’s education.
Then subtract savings and existing coverage your family could use.
A worked example
Here’s a hypothetical family: one parent earning $85,000 a year, two children, a mortgage, and some savings.
DIME component | How to calculate it | Sample figures |
Debt | Non-mortgage debts + final expenses | $25,000 debts + $15,000 final expenses = $40,000 |
Income | Annual income × years of support | $85,000 × 10 years = $850,000 |
Mortgage | Remaining principal | $250,000 |
Education | Planned amount per child × children | $50,000 × 2 = $100,000 |
Total need | Add the four | $1,240,000 |
Minus existing resources | Group life + savings | $85,000 + $30,000 = $115,000 |
Coverage to buy | Need minus resources | About $1,125,000 |
In this example, the family would look at a policy of around $1 million to $1.1 million. Using after-tax income instead of gross income, or fewer years of support, would lower the number; adding inflation or more years would raise it.
Don’t forget a stay-at-home parent
A stay-at-home parent may not earn a salary, but replacing their childcare, transport, and household work can be expensive. Estimate what it would cost in your area to pay for childcare, after-school care, and household help for the years until your youngest child is independent, and cover that amount. Leaving a stay-at-home parent uninsured or underinsured is an easy gap to miss.
Choose the length of coverage
Term length | Often fits |
10 years | Short-term debts, bridging to retirement |
15 years | A mortgage with about 15 years left, teenagers at home |
20 years | Young children, a large part of a mortgage |
25 to 30 years | A new 30-year mortgage, newborns or young children |
Lifetime | Final expenses, estate planning, lifelong dependents |
M Life Insurance’s life insurance calculator and guide to how much life insurance you need can help you run your own numbers.
Step 3: Choose the Type of Policy
Term life gives the most coverage per dollar and suits most families with temporary needs. Whole life and universal life cost more but last for life, and final expense insurance offers smaller, easier-to-get coverage for older buyers. The right type depends on how long you need coverage and what you can afford.
Term life insurance
Term life covers you for a set period, such as 10, 20, or 30 years, at a level premium. If you die during the term, your beneficiaries receive the death benefit. If you outlive it, coverage ends. It’s the most affordable way to buy a large amount of coverage. For example, Choice Mutual’s March 2026 sample rates for a healthy 35-year-old are about $17 (female) to $20 (male) a month for $500,000 of 20-year term. See M Life Insurance’s term life insurance rates chart.
Whole life insurance
Whole life covers you for life, with a fixed premium, a guaranteed death benefit, and a guaranteed cash value that grows tax-deferred. It costs much more than term: MoneyGeek’s November 2026 averages for $100,000 of whole life are about $87 to $96 a month at age 30. See how whole life builds cash value.
Universal life insurance
Universal life is permanent coverage with more flexibility:
- Guaranteed universal life (GUL): lifetime or long-term coverage at a lower cost than whole life, with little cash value.
- Indexed universal life (IUL): cash value growth tied to a market index, with caps and floors.
- Variable universal life (VUL): cash value invested in sub-accounts, with market risk.
Universal life policies can lapse if they’re underfunded, so they need regular review. See M Life Insurance’s guide to universal life insurance.
Final expense insurance
Final expense insurance is a small whole life policy, often a few thousand dollars up to about $25,000 to $35,000, designed to cover funeral and end-of-life costs. Most policies don’t require a medical exam. Choice Mutual’s March 2026 sample rates for a $10,000 policy at age 65 run about $41 to $54 a month. See M Life Insurance’s final expense insurance guide.
Policy types compared
Feature | Term life | Whole life | Universal life | Final expense |
How long it lasts | 10 to 30 years | Lifetime | Lifetime if funded, or to a set age | Lifetime |
Relative cost | Lowest | Highest | Between term and whole | Low total cost, high per dollar of coverage |
Cash value | None | Guaranteed | Varies by type | Small, guaranteed |
Medical exam | Often, for larger amounts | Often | Often | Usually not |
Typical coverage | $100,000 to $1 million+ | Varies widely | Varies widely | A few thousand to about $35,000 |
Best for | Families, mortgages, income replacement | Lifelong coverage, forced savings | Estate planning, flexible permanent coverage | Seniors covering funeral costs |
Which type fits you?
Does your need end at a known time (kids grown, mortgage paid)?
├── Yes → Term life
└── No → Do you mainly need to cover funeral costs?
├── Yes → Final expense insurance
└── No → Do you want guaranteed cash value?
├── Yes → Whole life
└── No → Guaranteed universal life
Step 4: Check the Insurer and Choose Your Riders
A life insurance policy is only as good as the company behind it. Look for an insurer with a strong financial strength rating, such as A or better from AM Best, and a complaint record at or below the industry norm. Then add only the riders that solve a real problem for you.
Financial strength ratings
AM Best is one of the main agencies that rate insurers’ ability to pay claims. Its financial strength ratings run from:
AM Best rating | Descriptor |
A++, A+ | Superior |
A, A- | Excellent |
B++, B+ | Good |
B, B- | Fair |
C++, C+ | Marginal |
C, C- | Weak |
D | Poor |
Many buyers look for an insurer rated A- or higher, and A or higher for long-term permanent policies. Moody’s, S&P Global, and Fitch also rate insurers, using their own scales.
Complaint records
The NAIC’s Consumer Insurance Search tool lets you look up insurers’ complaint information. Complaint indexes compare an insurer’s share of complaints with its share of business. Indiana’s Department of Insurance explains that an index of 1.00 means an insurer’s share of complaints equals its share of the market; 2.00 means twice as many complaints as expected, and 0.50 means half. Lower is generally better, but look at several years, since small insurers’ numbers can swing.
Riders worth considering
Riders are optional features added to a policy, sometimes for an extra cost.
- Accelerated death benefit: lets you receive part of the death benefit early if you’re diagnosed with a terminal illness, and on some policies a chronic or critical illness. Many policies include it at no upfront cost, though receiving the benefit reduces what your beneficiaries get.
- Waiver of premium: waives your premiums if you become disabled and can’t work, keeping the policy in force.
- Term conversion: lets you convert term coverage to permanent coverage without new medical questions, usually before a set age or year. Valuable if your health might change.
- Child term rider: adds a small amount of coverage for your children, often convertible to their own policy later.
- Return of premium: refunds premiums if you outlive a term policy, but makes the policy much more expensive.
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Riders and insurer checks at a glance
Feature or check | What it does | Typical cost impact | Is it worth it? |
AM Best rating A or higher | Shows strong ability to pay claims | None | Check every insurer |
Complaint index at or below 1.00 | Shows customer service record | None | Check alongside ratings |
Accelerated death benefit | Early payout for terminal illness | Often included | Yes, if included |
Waiver of premium | Covers premiums during disability | Extra premium | Often, for main earners |
Term conversion | Lets you switch to permanent coverage later | Usually included in term | Check the deadline |
Child term rider | Small coverage for children | Low extra cost | Optional |
Return of premium | Refund if you outlive the term | Much higher premium | Usually not, for most budgets |
Note: Read how each rider defines its triggers. “Chronic illness” and “disability” can be defined narrowly, and some riders end at a certain age.
Step 5: Underwriting, Exclusions and Beneficiaries
Before you sign, understand how the insurer will assess you, what the policy won’t cover, and who will receive the money. Honest answers on the application, a clear beneficiary plan, and awareness of the contestability period protect your family’s claim.
How underwriting works
Underwriting is how the insurer decides whether to approve you and at what price.
- Traditional (paramedical) underwriting: a full application, a short medical exam with blood and urine samples, and a review of records. It can take several weeks but often gives access to the best rates for large policies.
- Accelerated underwriting: no exam for healthy applicants; the insurer uses your answers and data such as prescription history and driving records. Decisions can come within days.
- Simplified issue: health questions only, usually for smaller amounts, often at a higher price.
- Guaranteed issue: no health questions, small amounts, and typically a waiting period.
You’ll then be placed in a rate class, commonly Preferred Plus, Preferred, Standard Plus, or Standard, with table ratings for higher-risk health histories. The rate class has a big effect on price, which is why comparing insurers matters.
Exclusions and terms to understand
- Contestability period: usually the first two years. If the insured dies in that time, the insurer can review the application and may deny a claim if it finds a material misrepresentation.
- Suicide clause: most policies don’t pay the full death benefit for suicide within the first two years, typically refunding premiums instead. Some states set a shorter period.
- Material misrepresentation: leaving out or misstating important facts, such as a health condition or tobacco use, can lead to a denied claim or a cancelled policy.
- Other exclusions: some policies exclude certain risky activities or, in limited cases, deaths related to war. Read the policy’s exclusions section.
Choosing beneficiaries
- Primary and contingent beneficiaries: name both, so the money has somewhere to go if your primary beneficiary dies first.
- Per stirpes vs. per capita: per stirpes passes a deceased beneficiary’s share to their children; per capita divides the money among surviving beneficiaries only.
- Minor children: insurers generally won’t pay a large death benefit directly to a minor. If you name a child, a court may have to appoint a guardian to manage the money. Naming a trust, or a custodian under your state’s Uniform Transfers to Minors Act (UTMA), avoids that.
- Keep it current: update beneficiaries after marriage, divorce, a birth, or a death in the family. Your beneficiary designation generally overrides your will.
M Life Insurance’s guides on how to change a beneficiary and who gets life insurance if a beneficiary is deceased cover these situations in more detail.
How to Compare Policies and Avoid Common Mistakes
To compare life insurance policies fairly, line up quotes for the same coverage amount, term length, and rate class, and check what each includes. Most buying mistakes come from buying too little, waiting too long, or not comparing at all.
How to compare policies side by side
When you compare quotes, make sure each one matches on:
- Coverage amount: the same death benefit.
- Term length or policy type: a 20-year term vs. a 20-year term, not vs. a 30-year term.
- Rate class: quotes often assume the best class; ask what class you’re likely to get.
- Conversion rights: how long you can convert, and to which permanent policies.
- Included riders: such as accelerated death benefit and waiver of premium.
- Insurer strength: AM Best rating and complaint record.
A slightly higher premium can be worth it for a stronger insurer, better conversion options, or riders you’d actually use.
Mistakes to avoid when buying life insurance
- Relying only on coverage through work. Group life is often a modest amount and usually ends when you leave the job. See M Life Insurance’s comparison of group vs. individual life insurance.
- Underinsuring or skipping a stay-at-home parent. Their work would be costly to replace.
- Waiting until your health changes. Rates rise with age, and a new diagnosis can move you into a more expensive class or make coverage harder to get.
- Naming minor children directly as beneficiaries. Use a trust or a UTMA custodian instead.
- Buying a policy type that doesn’t fit your budget. A permanent policy you can’t keep paying may lapse, leaving you with nothing.
- Not comparing insurers. Prices and underwriting differ, so one quote rarely tells the whole story.
- Leaving out information on the application. Misstatements can cause a claim to be denied during the contestability period.
Tips for buying life insurance
- Buy coverage sized to your real need, not a round number.
- Pay annually if you can; some insurers charge less than paying monthly.
- Keep existing coverage in force until a new policy is approved and active.
- Review your coverage every few years or after a major life event.
Captive Agents vs. Independent Agents
A captive agent sells policies from one insurance company, while an independent agent or broker can offer policies from several. Both can give good service, but an independent agent can compare more options, which helps when your health, age, or coverage needs are unusual.
| Captive agent | Independent agent or broker |
Insurers offered | One company | Several companies |
Comparison shopping | Limited to that company’s products | Across insurers |
Underwriting fit | One set of rules | Can look for an insurer that rates your health more favorably |
Best for | People loyal to one insurer or bundling with other policies | People who want to compare price and underwriting |
Whichever you use, ask how the agent is paid, which insurers they work with, and why they’re recommending a particular policy.
Getting quotes with M Life Insurance
M Life Insurance helps you compare term, whole life, and final expense options and talk through your coverage needs with a licensed agent. Before you request a quote, have ready:
- Your coverage amount from the DIME calculation
- The term length or policy type you’re considering
- Your height, weight, medications, and major health history
- Tobacco use
- Your beneficiaries’ names
See M Life Insurance quotes to get started.
Conclusion
Choosing a life insurance policy is easier when you take it one decision at a time: purpose, amount, type, insurer, and fine print. For most families, a term policy sized with a needs calculation, from a financially strong insurer, with the right beneficiaries in place, does the job well. Buying earlier, while you’re younger and healthier, usually locks in a lower price.
Your situation | Where to start |
Young family with a mortgage | 20- or 30-year term, sized with DIME |
Single with no dependents | Small term policy or final expense, if anyone would pay your debts or funeral |
Stay-at-home parent | Term coverage based on the cost of replacing their work |
High income or business owner | Larger term policy, possibly permanent coverage for estate needs |
Lifelong dependent | Permanent coverage, often with a trust as beneficiary |
Age 50 or older, mainly funeral costs | Final expense insurance |
Health conditions | Compare several insurers; consider simplified issue |
Compare Life Insurance Policies With M Life Insurance
When you’re ready, M Life Insurance can help you compare policies and choose coverage that fits your family and budget. Compare life insurance policies at M Life Insurance, or call (800) 661-8136 to talk with a licensed agent.
Secure Your Family's Future with Confidence
Don’t leave your loved ones' financial security to chance. Use our expert tools and free resources to find the perfect coverage today.
FAQS
Follow five steps: decide what the coverage is for and how long you need it, calculate a coverage amount using a method like DIME, choose term for temporary needs or permanent coverage for lifelong ones, pick a financially strong insurer with the riders you need, and compare quotes for identical coverage from several insurers.
The main factors are how much coverage you need, how long you need it, the type of policy, the insurer’s financial strength and complaint record, the riders included or available, the underwriting process, and the rate class you’re likely to qualify for. Your budget matters too, since a policy only helps if you can keep paying for it.
A common starting point is the DIME method: add your non-mortgage debts and final expenses, your income times the years your family would need it, your remaining mortgage, and planned education costs, then subtract savings and existing coverage. For a hypothetical family earning $85,000 with a $250,000 mortgage and two children, that comes to roughly $1.1 million.
Term life covers a set period, has no cash value, and costs much less. Whole life covers you for life, has a fixed premium, and builds guaranteed cash value, but costs many times more. For a 30-year-old, $100,000 of 20-year term costs about $11 to $12 a month in Choice Mutual’s March 2026 samples, while $100,000 of whole life averages about $87 to $96 in MoneyGeek’s November 2026 data.
Compare quotes with the same coverage amount, term length or policy type, and rate class. Then check each insurer’s AM Best rating and complaint record, what riders are included, and how long you can convert term coverage to permanent. Getting quotes from several insurers, often through an independent agent, gives the clearest comparison.
Look for strong financial strength ratings, such as A or better from AM Best, and a complaint index at or below 1.00, which means the insurer gets no more complaints than its size would predict. Also consider how the insurer underwrites health conditions like yours, the riders it offers, its conversion options, and how easy it is to work with.
Common mistakes include relying only on group coverage through work, underinsuring a stay-at-home parent, waiting until your health changes, naming minor children directly as beneficiaries, buying a permanent policy you can’t afford to keep, leaving information off the application, and not comparing more than one insurer.
It depends on the underwriting. With accelerated underwriting, healthy applicants can sometimes be approved within days. Traditional underwriting with a medical exam and record review often takes several weeks. Simplified issue and guaranteed issue policies are usually the fastest, but offer smaller amounts.
Sources and 2026 Verification
- CNBC Select: AM Best rating scale
- NAIC: Consumer Insurance Search
- Indiana Department of Insurance: Complaint index information
- Choice Mutual: $500,000 life insurance rates, valid March 9, 2026
- Choice Mutual: $100,000 life insurance rates, valid March 9, 2026
- Choice Mutual: Burial insurance costs by age, valid March 9, 2026
- MoneyGeek: Cheapest whole life insurance, November 2026
Disclaimer: This article is general information, not financial, tax, or legal advice. The DIME example and rate figures are illustrations; your needs and quotes will differ. Contestability, suicide clause, and beneficiary rules vary by state and policy. Read your policy and consult a licensed professional for advice on your situation.
Joyce Espinoza, Expert Life Insurance Agent
Joyce Espinoza is a trusted life insurance agent at mLifeInsurance.com. She’s been in the insurance industry for over ten years, helping people, especially those with special health conditions to find the right coverage. At MLife Insurance, Joyce writes easy-to-understand articles that help readers make smart choices about life insurance. Previously, she worked directly with clients at Mlife Insurance, advising nearly 3,000 of them on life insurance options.
